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1     These Guidelines are prescribed by the Securities and Futures Commission, Ministry of Finance ("SFC") for examination of applications by issuers for issuance of call (put) warrants.
2     Unless otherwise provided for in the Securities and Exchange Law or other laws and regulations, the issuance of the call (put) warrants shall be governed by these Guidelines.
3     The term "call (put) warrants" referred to in these Guidelines shall mean the securities issued by a third party other than the issuing company of the underlying securities, which represent that the holder of such call (put) warrant has the option to purchase the underlying securities from or sell the same to the issuer at the agreed strike price during the option period or on a specified maturity date or to collect a spread by settlement in cash.
    The underlying securities represented by call (put) warrants shall be limited to listed shares or portfolios thereof.
4     The term "issuer" referred to in these Guidelines shall mean a third party other than the issuing company of the underlying securities that meets one of the following qualifications:
  1. dealing in banking business and obtaining the approval of the central authority with jurisdiction over the business of such company; or
  2. concurrently engaging in securities underwriting, proprietary dealing, and brokerage or commission agency.
    If the issuer is a foreign institution, its head office (headquarters) shall provide a consent letter or performance guarantee from the board of directors, after which the application shall be filed by its Taiwan branch. The business scope of the head office (headquarters) as well as those of the branch office shall conform with the provisions in the preceding Paragraph.
5     An issuer issuing call (put) warrants shall first apply to the SFC for a qualification certificate for issuing call (put) warrants.
    To apply to the SFC for the qualification certificate for issuing call (put) warrants, an issuer shall submit to the Taiwan Stock Exchange Corporation ("TSE") an "Application for Approval of Qualifications for Issuing Call (Put) Warrants" as per the attached schedule, stating the required information, together with two copies of the required documents. After the TSE has examined and approved the application and provided its comments, the application shall be submitted to the SFC for examination.
    An issuer shall obtain a specified credit rating from a SFC-approved credit rating institution.
    For reviewing an application for the qualification certificate referred to in Paragraph 1 above, the SFC shall conduct an examination based on the financial reports audited by an accountant according to relevant rules, legal opinion issued by a lawyer, credit rating information, relevant documents, and the examination comments of the TSE.
Article 5  An issuer issuing call (put) warrants shall first apply to the SFC for a qualification certificate for issuing call (put) warrants.  To apply to the SFC for the qualification certificate for issuing call (put) warrants, an issuer shall submit to the Taiwan Stock Exchange Corporation ("TSE") an "Application for Approval of Qualifications for Issuing Call (Put) Warrants" as per the attached schedule, stating the required information, together with two copies of the required documents. After the TSE has examined and approved the application and provided its comments, the application shall be submitted to the SFC for examination.  An issuer who obtains the approval of the qualifications for issuing call (put) warrants one year after these Guidelines have been promulgated shall obtain a specified credit rating from a SFC-approved credit rating institution.  For reviewing an application for the qualification certificate referred to in Paragraph 1 above, the SFC shall conduct an examination based on the financial reports audited by an accountant according to relevant rules, legal opinion issued by a lawyer, credit rating information, relevant documents, and the examination comments of the TSE.
6     An issuer shall not publicize that its application matters are substantiated or that the value of the call (put) warrants is guaranteed based on the fact that it has obtained the qualification certificate for issuing put (call) warrants.
7     From the date on which an issuer applies to the SFC for the qualification certificate for issuing call (put) warrants, if any event materially affecting shareholders' equity under Item 2 of Paragraph 2 of Article 36 of the Securities and Exchange Law occurs, the issuer shall, in addition to reporting to the SFC and the TSE within 2 days from the occurrence of the event, based on the nature of the event, provide relevant expert's opinions to the accountant and ask the accountant to provide its comments on the impact on the financial report and submit the same to the TSE. The TSE shall provide its opinion for handling such matters and submit a written report to the SFC.
8     In the event that an issuer applying for approval of qualifications for issuing call (put) warrants has any of the following conditions, the SFC may reject the application:
  1. where the application documents are incomplete or contain false statement;
  2. where the issuer suffers a major event of losts of creditworthiness and such event has not been settled, or 4 years have not elapsed since such settlement;
  3. where the issuer has been ordered to suspend its business by any foreign or domestic authority having jurisdiction over the business of the issuer or the competent authority of securities and futures within the last two years;
  4. where a banking enterprise applies to become an issuer, the approval of the central authority having jurisdiction over its business has not been obtained;
  5. where the issuer is a securities enterprise and it has been subject to a punishment more severe than that under Item 2 of Article 66 of the Securities and Exchange Law or punished by the stock exchange or over-the-counter securities exchange in accordance with their bylaws by suspending or restricting its transactions within the last 2 years; or where, the issuer is a foreign securities firm with a branch office in the ROC, and its foreign head office (headquarters) has been imposed similar punishment by its authority in charge of securities during the same period;
  6. where any director, supervisor, or manager of the issuer has any of the conditions provided in Items 1 through 5 of Article 53 of the Securities and Exchange Law or any similar condition under equivalent foreign futures and securities laws and regulations, or where the issuer is subject to a punishment more severe than a fine for violation of the Futures Trading Law, Company Law, Securities and Exchange Law, Banking Law, or Statute Governing Administration of Foreign Exchange, or equivalent foreign laws and regulations, and 5 years have not elapsed since the completion of execution, expiration of the period of suspension of punishment, or remission of the punishment;
  7. where there is significant dispute over the rights and interests of the company or violation of law which may affect the company's finance and business, and no settlement or improvement has been made;
  8. where the issuer is a branch office of a foreign institution, and its head office (headquarters) has committed in its home jurisdiction or foreign jurisdiction any offense equivalent of those under Item (5) and Item (6) above;
  9. where the issuer has previously issued call (put) warrants and was unable to perform the contracts;
  10. where the issuer fails to prepare financial reports in accordance with the generally accepted accounting principles, or where its internal control system cannot be operated efficiently;
  11. where the issuer does not have proper risk management measures;
  12. where the issuer violates Item 7 of these Guidelines, or where an assessment shows that the matters reported by it might have significant impact on its financial status;
  13. where in the most recent year the issuer has failed to process matters in accordance with regulations relevant to call (put) warrants, and has failed to improve within the specified time period;
  14. where there is factual evidence to show that its finances or business is abnormally irregular; or
  15. where the SFC considers necessary to protect the public interest.
Article 8  In the event that an issuer applying for approval of qualifications for issuing call (put) warrants has any of the following conditions, the SFC may reject the application:  (1) where the application documents are incomplete or contain false statement;  (2) where the issuer suffers a major event of losts of creditworthiness and such event has not been settled, or 4 years have not elapsed since such settlement;  (3) where the issuer has been ordered to suspend its business by any foreign or domestic authority having jurisdiction over the business of the issuer or the competent authority of securities and futures within the last two years;  (4) where a banking enterprise applies to become an issuer, the approval of the central authority having jurisdiction over its business has not been obtained;  (5) where the issuer is a securities enterprise and it has been subject to a punishment more severe than that under Item 2 of Article 66 of the Securities and Exchange Law or punished by the stock exchange or over-the-counter securities exchange in accordance with their bylaws by suspending or restricting its transactions within the last 2 years; or where, the issuer is a foreign securities firm with a branch office in the ROC, and its foreign head office (headquarters) has been imposed similar punishment by its authority in charge of securities during the same period;  (6) where any director, supervisor, or manager of the issuer has any of the conditions provided in Items 1 through 5 of Article 53 of the Securities and Exchange Law or any similar condition under equivalent foreign futures and securities laws and regulations, or where the issuer is subject to a punishment more severe than a fine for violation of the Futures Trading Law, Company Law, Securities and Exchange Law, Banking Law, or Statute Governing Administration of Foreign Exchange, or equivalent foreign laws and regulations, and 5 years have not elapsed since the completion of execution, expiration of the period of suspension of punishment, or remission of the punishment;  (7) where there is significant dispute over the rights and interests of the company or violation of law which may affect the company's finance and business, and no settlement or improvement has been made;  (8) where the issuer is a branch office of a foreign institution, and its head office (headquarters) has committed in its home jurisdiction or foreign jurisdiction any offense equivalent of those under Item (5) and Item (6) above;  (9) where the issuer has previously issued call (put) warrants and was unable to perform the contracts;  (10) where the issuer fails to prepare financial reports in accordance with the generally accepted accounting principles, or where its internal control system cannot be operated efficiently;  (11) where the issuer does not have proper risk management measures;  (12) where the issuer violates Item 7 of these Guidelines, or where an assessment shows that the matters reported by it might have significant impact on its financial status; or  (13) where the SFC considers necessary to protect the public interest.  In the event that an issuer applying for approval of qualifications for issuing call (put) warrants has any of the following conditions, the SFC may reject the application:  (1) where the application documents are incomplete or contain false statement;  (2) where the issuer suffers a major event of losts of creditworthiness and such event has not been settled, or 4 years have not elapsed since such settlement;  (3) where the issuer has been ordered to suspend its business by any foreign or domestic authority having jurisdiction over the business of the issuer or the competent authority of securities and futures within the last two years;  (4) where a banking enterprise applies to become an issuer, the approval of the central authority having jurisdiction over its business has not been obtained;  (5) where the issuer is a securities enterprise and it has been subject to a punishment more severe than that under Item 2 of Article 66 of the Securities and Exchange Law or punished by the stock exchange or over-the-counter securities exchange in accordance with their bylaws by suspending or restricting its transactions within the last 2 years; or where, the issuer is a foreign securities firm with a branch office in the ROC, and its foreign head office (headquarters) has been imposed similar punishment by its authority in charge of securities during the same period;  (6) where any director, supervisor, or manager of the issuer has any of the conditions provided in Items 1 through 5 of Article 53 of the Securities and Exchange Law or any similar condition under equivalent foreign futures and securities laws and regulations, or where the issuer is subject to a punishment more severe than a fine for violation of the Futures Trading Law, Company Law, Securities and Exchange Law, Banking Law, or Statute Governing Administration of Foreign Exchange, or equivalent foreign laws and regulations, and 5 years have not elapsed since the completion of execution, expiration of the period of suspension of punishment, or remission of the punishment;  (7) where there is significant dispute over the rights and interests of the company or violation of law which may affect the company's finance and business, and no settlement or improvement has been made;  (8) where the issuer is a branch office of a foreign institution, and its head office (headquarters) has committed in its home jurisdiction or foreign jurisdiction any offense equivalent of those under Item (5) and Item (6) above;  (9) where the issuer has previously issued call (put) warrants and was unable to perform the contracts;  (10) where the issuer fails to prepare financial reports in accordance with the generally accepted accounting principles, or where its internal control system cannot be operated efficiently;  (11) where the issuer does not have proper risk management measures;  (12) where the issuer violates Item 7 of these Guidelines, or where an assessment shows that the matters reported by it might have significant impact on its financial status; or  (13) where the SFC considers necessary to protect the public interest.
9
  1. When an issuer applies for approval of qualifications for issuing call (put) warrants, unless otherwise provided by the SFC, the issuer shall be rated Baa3 or better by Moody's Investors Service, BBB- or better by Standard & Poor's Corporation, or twBBB- or better by Taiwan Rating Corporation.
  2. The provisions in the preceding Paragraph shall apply to the ratings of the guarantor or risk manager of the issuer of call (put) warrants.
10     After an approval of qualifications for issuing call (put) warrants is granted to an issuer by the SFC, the issuer shall, pursuant to the rules of the TSE, apply to the TSE for approval for trading the proposed call (put) warrants on the market. Issuance and sale of the warrants shall not be allowed until the TSE has submitted the approved issuance plan to the SFC.
    The issuer of the call (put) warrants referred to in the preceding Paragraph shall enter into a contract for listing the call (put) warrants with the TSE. The TSE shall submit the contract for listing to the SFC for approval.
11     After the contract for listing is approved by the SFC and before the call (put) warrants are traded on the market, if it is discovered or reported by the TSE that the issuer has any of the conditions under Paragraph 8 of these Guidelines, the approval may be revoked.
12     If the contract for listing reported by the TSE is disapproved by the SFC or if the approval is revoked, the provision of Item 2 of Paragraph 9 of these Guidelines shall apply mutatis mutandis.
13     After the qualification certificate for issuing call (put) warrants has been issued to an issuer by the SFC for 1 year, or after the approval is revoked by the SFC pursuant to Item 1 of Paragraph 9 of these Guidelines for 1 year, if the issuer wishes to re-issue the call (put) warrants, it shall apply for approval in accordance with Paragraph 5 of these Guidelines.
14     The issuance plan of the call (put) warrants shall contain the following particulars:
  1. issue date and term;
  2. detailed contents of underlying securities and securities portfolios;
  3. types of the call (put) warrant, total issuance units, and issuance amount;
  4. issuance conditions (including issue price, strike price, and performance period);
  5. detailed information of guarantor and contents of guarantee contract or collateral;
  6. procedures for request for performance of contract, and a clause regarding cancellation of the call (put) warrants due to redemption;
  7. proposed risk offsetting strategies;
  8. provisions regarding the adjustment of strike price of the call (put) warrants or relevant matters due to distribution of dividend, bonus, capital increase, capital decrease, stock split, or consolidation and other relevant matters by the issuing company of the underlying securities;
  9. disposition methods in the case of the merger, change of trading method, suspension of trading, or de-listing of stocks of the issuing company of the underlying securities ;
  10. method of disposition in the case of the listing, de-listing or suspension of trading of the call (put) warrants by the TSE; and
  11. other matters to be stated as required by the SFC.
15     An issuer may consign a securities underwriter to underwrite the call (put) warrants or sell such warrants by itself. The issuer shall deliver a prospectus to the subscribers.
    Matters to be stated in the prospectus referred to in the preceding paragraph shall be prescribed by the TSE and reported to the SFC for approval.
16     These Guidelines shall become effective as from the date of promulgation.
Article 16  These Guidelines shall become effective as of June 1, 1997.